Sonoma County Mortgages

All financing provided by New American Funding

(707) 217-4000 | Prequalify Now
  • Home
  • Purchase
    • How Much Down Payment To Buy A Home?
    • How Much Income You Need To Buy A Home
    • How Much Should I Save For Buying A Home?
      • How Rates Affect Payment
    • No PMI Mortgages
    • FHA Loans
    • Sonoma County Disaster Loans
    • Jumbo Loans
  • Refinance
    • Mortgage Rates
    • Does It Make Sense To Refinance?
      • Get Your Refi Paperwork In Order
    • How To Pay Off Your Loan Faster
    • How To Remove PMI
    • How Lenders Price & Quote Loans
  • Loan Programs
  • Payment Calculator
    • Mortgage Affordability Calculator
  • Blog
  • Videos
  • Scott Sheldon
    • Scott Sheldon
      Senior Loan Officer
      NMLS ID# 287389
      Direct: 707 217-4000
      Scott.Sheldon@nafinc.com
      Specializing in Residential Home Loans for Primary Residences, Second Homes, Investment Properties, Single Family Homes, Condos, PUDs, 1-4 Units.

Get Your Latest Rate Quote Now!

What you must do when getting an FHA mortgage with an income based student loan

October 3, 2017 by sonomacountym

Share on Facebook
Facebook
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin
Pin on Pinterest
Pinterest
Email this to someone
email
Print this page
Print
how to get a mortgage with tax returns

FHA loans generally are easier to get than conventional mortgages. They require less money down, allow higher payment to income ratios and generally provide more flexibility for borrowing mortgage money. If you have an income based student loan you will want to pay close attention to the details about to follow….

Mortgage lenders used to be able to use the payments associated with the student loans reporting on the credit report. Generally speaking lenders are required to use the payments associated with the credit report and use the payments from the credit report in the calculation of the debt to income ratio.

Where this becomes particularly problematic with FHA mortgages is on income-based student loans. Income-based student loans generally have a monthly payment associated with the student loan that is much lower than what the repayment of that loan would otherwise look like. To account for this the FHA requires the lender use1% of the total student loan balance or borrower to provide a letter from the student loan servicer specifically providing the amortized payment. This direction generally provides a lower payment than the 1% rule.

Let’s say you have a student loan for $100k and let’s say based on your income repayment, the payment associated with that $100,000 student loan is $50 per month. It is not reasonable $50 per month could service $100k in student loan debt. In this case the mortgage lender would use 1% so the payment is now $833 per month which would limit this applicant’s borrowing power to the tune of $200k. In this example the borrower provides documentation showing the amortized payment. If the amortized payment is $400 for example now this borrower has a better borrowing platform with a $400 per month debt than an $833 per month debt. It is especially important because mortgage banks use monthly payments to qualify you in supporting your ability to repay on paper.

Let’s say your lender makes a mistakes qualifies you to buy a home using the low payments on the credit report. To save the integrity of your pre-approval your options would be;

  • Get the exact amount of amortized payment from your student loans servicer
  • Put more money down
  • Pay off other payment debts like a car or another installment loan if applicable
  • Get a co-signor

Make sure if you are getting preapproved to buy a home the lender does a thorough review of your complete financial picture prior to going home searching.

Get pre-approved to buy a home now. There is no cost, no obligation and no hidden fees.

 

Related Mortgage Advice from Scott Sheldon

  • Understanding FHA Home Loans

    The two types of loans offered by a local mortgage lenders are conventional loans and…

  • Get A Mortgage Rate Quote

    If you are looking for a Sonoma County Mortgage, get a mortgage rate quote. Mortgage…

  • 6 things you need for a mortgage
    Your Student Loan Credit May Secretly Limit Your Mortgage Options

    If not handled properly, your student loan may adversely change your home purchase plans. Here's…

  • 6 common mortgage loan scenarios you cannot circumnavigate
    3 things you must have for a mortgage loan

    If you've never bought a home before or it has been many years since your…

Filed Under: Uncategorized Tagged With: fha mortgages with student loans, free rate quote, income based student loans, mortgage rate quote, preapproval to buy a home, qualifying for a mortgage, sonoma county home buying, sonoma county refinancing

SCM on Zillow

Zillow Reviews for Scott Sheldon, New American Funding

SCM on Facebook

SonomaCountyMortgages.com

Location & Contact

Scott Sheldon, Senior Loan Officer
NMLS ID# 287389
1450 Neotomas Ave Suite 115
Santa Rosa, CA 95405
1-707-217-4000
Email Us!

Copyright 2019 SonomaCountyMortgages.com · About Us · Sonoma County Loans · Privacy Policy · Terms Of Use · Legal · Site Map

NMLS Consumer Access © New American Funding. All rights Reserved. NMLS ID#6606.
Corporate Office 14511 Myford Road, Suite 100, Tustin, CA 92780. We at New American Funding take great pride in our customer service and make it our number one priority. We encourage you to contact us for complaint resolution or any post-closing questions you may have regarding the servicing of your loan. We strive to have your experience with New American Funding a stellar one. In the rare case that our service did not meet your expectations, please call our customer care hotline at 1-800- 450-2010, ext. 7100 or you may contact us by email customerservice@nafinc.com. Please leave a detailed message and we will follow up with you no later than the end of the next business day. If you are using a screen reader or other auxiliary aid and are having problems using this website, please call 800-450-2010 Ext. 7100 for assistance.

State Licensing | Privacy | Terms of Use | Electronic Consent Agreement

Connect With Scott In Your Inbox

Looking for a home? Real estate insider? Get connected with Senior Loan Officer Scott Sheldon. Scott stays updated on the latest in the mortgage industry, so you can stay updated with him!